Having inched up 1 percent the week prior, the number of applications to secure a purchase mortgage loan for an existing home in the U.S., which is a leading indicator, dropped 5 percent last week and was down 21 percent on a year-over-year basis, based on application data from the Mortgage Bankers Association.
The 21 percent year-over-year drop, however, was on top of a 38 percent drop in purchase mortgage activity from 2021 to 2022, for an effective drop of over 50 percent from 2021 to 2023.
Sounds about right. Rates doubling from 3.75% to 7.5%
So that would mean half the prospective buyers have gone back to renting?
It would be interesting to find out how many people have their illegal short-term rentals mortgaged as owner-occupied housing.
I’m sure some of those buyers now not seeking a mortgage were people who own their homes and were seeking to finance their AirBnB/VRBO rentals, and therefore are not going “back to renting”.
Their absence from the marketplace will be restored quickly once rates come back down to around 5 percent (I am not forecasting when that will happen).
That’s incorrect. The vast majority of prospective homebuyers already own a home.
This is what could happen:
1) 3/5 yrs APRs get reset and unless they can be supported by savings or employment, baseline pricing support would erode
2) People will marry their “low interest mortgage” hopefully supported by employment
3) Employers will squeeze employees across the board with a new found understanding of #2
4) If employment can’t support – then expect more pain ahead. I am betting that employment can’t support – because there was never a need for as many jobs to support the pricing.
5) Doubtful stock market will bounce back in a secular manner anytime soon.
Pain ahead. Weak hands will be flushed out.
UPDATE: Purchase mortgage activity ticked down another 2 percent over the past week and was down 22 percent on a year-over-year basis and down over 50 percent over the psat two years, with overall mortgage application volume having dropped to an even lower 28-year low.
UPDATE: Purchase Mortgage Activity Drops to a Lower 28-Year Low